Life On The Sidelines: The Long-Term Unemployed Over 40 percent of those unemployed -- more than 6 million Americans -- have been out of work for six months or more. These levels have not been seen since the Great Depression. Economists say the long-term unemployed are vulnerable to losing critical job skills.
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Life On The Sidelines: The Long-Term Unemployed

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Life On The Sidelines: The Long-Term Unemployed

Life On The Sidelines: The Long-Term Unemployed

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As we just heard, the Federal Reserve's controversial action was intended to stimulate the U.S. economy and job growth. The numbers for job seekers these days are dire: nearly 15 million Americans out of work, another 9 million underemployed, and the jobless rate seemingly stuck at 9.6 percent.

But there's another statistic that gets less play. The number of people considered long-term unemployed is at levels not seen since the Great Depression. These are people who've been out of work for six months or more.

Today in our series on human capital, NPR's John Ydstie examines what happens when workers, and the skills they have, are sidelined for so long.

JOHN YDSTIE: Being out of work for more than six months isn't for the faint of heart. Just ask Sheila Egan; she's been out of work for more than a year.

Ms. SHEILA EGAN: I really think that if people aren't going through this right now, they don't get it. I don't think they see how difficult it really is.

YDSTIE: Egan, a 47-year-old single mother, sold pharmaceuticals for a big European firm for 11 years. She made a six-figure salary. Prior to that, she had applied for only five jobs in her career.

Ms. EGAN: And of those five jobs, I got four of them. And it has been very jarring to apply for a job that asks for one or two years' experience; you have 10, and you don't even get a call.

YDSTIE: Of course, Egan is not alone. Over 40 percent of the unemployed - more than 6 million Americans - have been out of work for six months or longer, according to government statistics. Those numbers came alive for Sheila Egan at an outplacement center she used to visit regularly.

Ms. EGAN: Every Wednesday morning, this room would fill with these incredibly talented, motivated, optimistic people. And I would just sit and look around the table and think, I cannot believe these people don't have jobs. And week after week, they would come back, and I would just be stunned at the amount of talent sitting in this room, unemployed.

Mr. JACOB KIRKEGAARD (Fellow, Peterson Institute for International Economics): The wasted human capital is just tremendous.

YDSTIE: Jacob Kirkegaard has studied the effects of long-term unemployment in Europe, where it became a huge problem - with more than half of all jobless workers experiencing long-term unemployment.

Mr. KIRKEGAARD: Once people become unemployed for long periods of time, you start seeing a serious depreciation - or a reduction - in their skill levels, in the human capital that they carry.

YDSTIE: That happens in several ways, says Kirkegaard, a fellow at the Peterson Institute for International Economics. One is when people are forced to look for jobs outside their current occupation.

Mr. KIRKEGAARD: If you shift from being an autoworker to being, you know, a nurse, you basically lose all the human capital that you embodied as a skilled autoworker.

YDSTIE: Now if that unemployed auto worker became a skilled nurse, that could be a good thing. But in the current situation, when large numbers of people are being forced to trade down from high-skill jobs, the sidelining of their old skills is a big drag on the economy. And even if people stay in their current occupation, skills can atrophy after a worker is unemployed for long periods, says Kirkegaard.

Mr. KIRKEGAARD: They essentially lose contact with the latest developments in their own field.

YDSTIE: Sheila Egan worries she's falling behind on news about medical developments, which could hurt her chances of being re-hired as a pharmaceutical sales rep.

Ms. EGAN: Especially when you're looking at medical and scientific journals, they oftentimes require a subscription, or a pretty hefty annual fee.

YDSTIE: Expenses she can't afford right now. Egan is resigned to the prospect that even if she does land another job selling pharmaceuticals, it'll be at lower pay. Of course, says Jacob Kirkegaard, it's not just individuals that suffer when valuable human capital is lost or sidelined.

Mr. KIRKEGAARD: It is a tremendous drag on overall economic growth. There's no doubt about that.

YDSTIE: Europe demonstrated that in the 1980s and '90s, when high levels of long-term unemployment meant it grew slower than the United States. Kirkegaard warns that the level of long-term unemployment in the United States is unlikely to fall back to pre-crisis levels anytime soon, so the U.S. must do more to keep skill levels high for those workers. That means spending much more on effective retraining, he says.

Mr. KIRKEGAARD: If there's one thing where it is sensible for the government to have a bigger deficit in the short term in order to avoid long-term, lower economic growth, it is in combating long-term unemployment.

YDSTIE: Kirkegaard says the federal government has had the right idea, putting more money into community colleges recently. But that's been offset by cuts at the state and local level during this deep downturn. Now, with controlling deficits on the front burner politically, finding money for retraining to protect the nation's human capital will be a challenge.

John Ydstie, NPR News, Washington.

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